Check out this post by Nate Oman. Here is a taste:
-
Legal intellectuals are largely focused on regulating transactional structures or the governance of financial institutions. In other words, we are looking at the sorts of things that we are trained to think about, namely substantive legal rules. I suspect, however, that the reality is that the main drivers of the financial crisis were not regulatory. Rather they were monetary and fiscal. Another way of putting this is that the repeal of Glass-Steagall or the sloth of the SEC were bit players in the causation of crisis compared to monetary policy and fiscal subsidies. Mucking around with the regulation of mortgage brokers, the terms of home loans, methods of foreclosure, or executive bonuses is rather like dealing with the aftermath of the Titanic’s sinking by calling for marginal refinements in the rudder control of ocean liners.